Carbon Tariffs Research Articles

Carbon reduction in global supply network design subject to carbon tariffs and location-specific carbon policies

Carbon policies are often limited to specific regions. To avoid stricter carbon emission requirements, companies relocate production to regions without carbon policies that offer a higher degree of flexibility. This effect is known as carbon leakage. To prevent carbon leakage, carbon tariffs are imposed on carbon emissions imported into regulated regions. We present a new model formulation for the design of a global supply network subject to carbon tariffs and location-specific carbon policies. Relevant carbon emissions are captured by a product carbon footprint. This model plans the locations of manufacturing plants and distribution centers and the transportation between them. In addition, we consider the choice of production technologies to enable carbon reduction. The objective is to minimize the net present value. To solve this supply network design model, we apply a fix-and-optimize heuristic. Our numerical study demonstrates that the heuristic provides high-quality solutions in a reasonable time frame. We indicate that combining carbon tariffs with location-specific carbon policies fundamentally changes the economic and environmental consequences for the network design. In addition, we examine how carbon tariffs and location-specific carbon policies affect the choice of carbon-reducing production technologies.

Online carbon emissions auto-accounting approach in aluminum casting production

The 2030 Agenda for Sustainable Development is driving national and international strategic shift towards new generation of innovative technologies. Electric vehicle is one of these technologies that revolutionizes the global automotive industry. It also triggers a consecutive surge of aluminum castings production. However, as a key lightweight-enabling process, aluminum casting is energy-intensive and accounts for significant carbon emissions. The arriving carbon tariff further challenges overseas aluminum casting suppliers. Accurate carbon emissions accounting in aluminum casting production can support the development of product carbon label, which is an essential step for manufacturing enterprises to tackle carbon tariff. Existing carbon emissions accounting in production normally uses life cycle assessment (LCA), but in the actual production situation, the LCA-required multi-source data, including materials, process parameters, energy, quality, and etc., as these data are widely sourced, heterogeneous and complex to correlate, remain difficult to be used in the accurate carbon emissions accounting directly. This leads to low creditability of the results and low efficiency of the accounting performance. To address this issue, an online carbon emissions auto-accounting approach in aluminum casting production is proposed. First, based on the minimum data collection unit in each process, the accurate production data related to carbon emissions (CEPD) is identified and gathered using Internet of Things technology. Subsequently, the activity level data of aluminum casting is calculated through the developed mathematical model. Finally, the multi-level carbon emissions of aluminum casting can be obtained employing the emission factor method. An aluminum casting workshop that produces electric vehicle subframes is taken as a case study to implement and validate this online auto-accounting approach. It shows that the carbon emissions accounting is feasible.

Multistage global supply chain inventory model with the impact of carbon tariffs for deteriorating items

Multistage global supply chain inventory model with the impact of carbon tariffs for deteriorating items

EU 탄소국경조정제도의 경제적 파급영향 분석

The purpose of this study is to analyze the impact of the EU CBAM on international trade and suggest policy of reaction for Korea. The results of the analysis are as follows. First, we find that when the EU unilaterally imposes a carbon tariff, and its trading partners accept it, the EU's export competitiveness increase, but the exports of trading partners such as India and Russia decrease significantly. Second, when trading partners react to the EU's actions by imposing retaliatory tariffs, the EU's exports decline, and the losses of its major trading partners are reduced. Furthermore, intra-regional trade between EU countries increases with the introduction of CBAM, while trade with non-EU countries decreases significantly. Finally, the analysis shows a significant decrease in steel and aluminum trade among the world trade goods. In conclusion, if the EU does not take the initiative to talk with its trading partners to ensure they understand and accept the introduction of CBAMs, they are likely to take retaliatory measures, resulting in a slowdown in global trade. Therefore, Korea should monitor closely the progress of discussion related to this issue and prepare policy to minimize the impact on trade from such action.

Research on the Impact of Low-carbon Economy on the Development of China’s Foreign Trade

Focusing on high energy and low emissions, the low-carbon economic revolution in the fields of industry, energy, technology, and commerce has brought barriers such as carbon tariffs and carbon labels to the international trade process. Based on the data from 2006 to 2021, this paper explores the impact of low-carbon economy on China’s foreign trade development from five levels: low-carbon production technology level, RMB exchange rate, financing capacity, force majeure trade obstacles, and national system. The results show that the improvement of technological level is positively correlated with the export of goods trade, the level of the RMB exchange rate is negatively correlated with the export of goods trade, the financing ability is positively correlated with the export of goods trade, the trade obstacle of force majeure is negatively correlated with the export of goods, and the promotion effect of the national system is not significant.

Impact of carbon border adjustment mechanism on China's manufacturing sector: A dynamic recursive CGE model based on an evolutionary game

As the global carbon emission problem is getting more and more serious, the European Union has proposed the Carbon Border Adjustment Mechanism (CBAM) to prevent carbon leakage, which will have an impact on China's foreign trade. Based on this background and the problems of current research that ignores factors such as commodity prices, long-term impacts, intertemporal substitution analysis, and changes in national strategies for foreign exports, this paper propose a Computable General Equilibrium (CGE) model based on an evolutionary game as a dynamic recursive basis to study the impact of the CBAM on the Chinese manufacturing industry. For the industries mentioned in the CBAM, 18 affected sectors are collated, and a CGE model containing multiple blocks such as production, trade, and carbon emissions is built. Meanwhile, we establish an evolutionary game model with EU suppliers, manufacturers, and the government, allowing Chinese suppliers to compete with EU suppliers. Based on the above model, the impact of carbon tariff policies from 2020 to 2050 is studied. The results indicate that under the intra-EU competition condition, carbon tariffs will reduce the price of Chinese exports and slightly decrease China's real GDP, as well as the carbon emission intensity of 18 sectors and fossil energy. However, the impact of carbon tariffs on overall carbon emissions is small and is essentially a protective policy. In addition, the evolutionary game-based CGE model takes into account the dynamic strategies of both sides and is therefore less affected by carbon tariff shocks and recovers more quickly and more realistically. Finally, the article argues that the advantage of carbon tariffs for local suppliers is unsustainable and Chinese suppliers will still dominate, and local suppliers need more subsidies from the EU government. On the other hand, the Chinese government needs to implement a stricter carbon tax regime and export subsidies to improve the competitiveness of Chinese products in terms of green levels and price advantages. The purpose of this paper is to examine the quantitative impacts of CBAM on China's related manufacturing industries and strategies to maximize the benefits to both governments.

The effect of carbon tariffs and the associated coping strategies: A global supply chain perspective

Carbon regulation differences are the main obstacle to global carbon emissions reductions. To alleviate the global environmental pressures from carbon emissions, high-carbon-regulated countries are seeking to impose carbon tariffs on imported products. In response, low-carbon-regulated countries can choose to allocate carbon quotas on manufacturers (H strategy) or provide subsidies to reduce their emissions reduction costs (S strategy). Therefore, it is worth exploring the joint impact of carbon tariffs and the associated coping strategies. In this context, this paper explores optimal manufacturing production and emissions reductions, analyses the impact of carbon tariffs on carbon emissions and social welfare, and examines strategy selection in low-carbon regulated countries. It is found that both the production and profits for manufacturers with relatively low carbon emissions reduction costs can increase with carbon tariffs. When a carbon tariff is fixed, the response strategy in low-carbon-regulated countries can either increase or decrease global carbon emissions. Carbon tariffs always have a negative impact on the social welfare of low-carbon-regulated countries. Interestingly, carbon tariffs may also harm the social welfare of high-carbon-regulated countries, especially when their manufacturers have high emissions reduction costs. Finally, as for social welfare in low-carbon-regulated countries, high-carbon-regulated countries, and the global community, both H and S strategies can be win-win strategies when emissions reduction cost subsidies are moderate. However, when emissions reduction cost subsidies are high, H strategy is found to be a win-win strategy.

Analysis of China's steel response ways to EU CBAM policy based on embodied carbon intensity prediction

The EU Carbon Border Adjustment Mechanism (CBAM) has decided to impose carbon tariffs on some imported goods after 2026 based on their embodied carbon emissions. And China, as the fourth largest steel importer in the EU, its foreign trade in steel will undoubtedly be affected. The Multi-regional Input-output and Single-regional Input-Output models were used to calculate the embodied carbon in China's steel exports to the EU from 2000 to 2020. Under the current development scenario, the EU carbon tariff rate in 2034 will reach about 5.5%, exceeding the average profitability of steel in recent years. In order to reduce carbon tariffs, a strategy to accelerate the development of carbon reduction capacity is proposed from the perspective of reducing embodied carbon. Meanwhile, considering the development trend of the tradable green certificate system and the controversial nature of CBAM in the WTO framework, a countermeasure to promote green certificates offsetting carbon tariffs is proposed from the policy perspective, and the cost increase rate generated by this measure is calculated with the scenario settings, and the cost increase rate is only 1.1% under the best situation.

Impact of the EU carbon border adjustment mechanism on economic growth and resources supply in the BASIC countries

Global climate changes draw a consensus to accelerate the energy transition and reduce CO2 emissions. To cope with this, we need to tackle, among others, three challenges: how will the EU's Carbon Border Adjustment Mechanism (CBAM) affect other countries' economies and product supply? Does it pose a geopolitical risk to carbon-dependent emerging economies? Can China design and implement a carbon tariff? However, few systematic quantitative studies have been conducted to answer the above two questions. This paper employs the Global Trade Analysis Project (GTAP) and designs policy scenarios according to the target and the sectors covered by the tariff, to explore the economic effects of the EU's carbon tariff policy on China, India, Brazil and South Africa (hereinafter referred to as the “BASIC countries”), and the feasibility of the BASIC countries to adopt active emission reduction strategies under the differentiated carbon tax policy to cope with the threat of EU carbon tariffs. Besides, this paper also examines the possibility of China to impose a carbon tariff so as to reduce CO2 emissions. The research results show that: carbon tariffs have a negative impact on the economic development, residents' welfare, trade level and output of energy-intensive industries of the expropriated country; active emission reduction is more conducive to stimulating a green transformation of domestic industries than a passive carbon tariff; especially, as a largest developing country, when China takes active emission reductions and imposes carbon tariffs, its impact on the loss of world social welfare is small and world GDP growth occurs. This paper has enriched the relevant literature on carbon tax policy research, and the empirical results can provide references for countries around the world to carry out carbon reduction and formulate carbon tax policies.

Badanie ścieżki handlu uprawnieniami do emisji dwutlenku węgla w Chinach w kontekście tzw. podwójnego węgla

With the continuous development of the global economy, the rapid deterioration of the global ecological environment has caused a huge impact on the future development of the world. In order to solve the problem of global warming and enhance the self-development capacity of all countries, based on the concept of sustainable development, China has set the ambitious goal of dual carbon. To this end, China is actively promoting the establishment of a national carbon emissions trading system.In response to low price competitiveness, such as nonstandard trading system, the influence of the development of the carbon emissions trading system in the future, should not only attach importance to enrich and strengthen the basic function of the carbon market, also continue to carbon pricing system and in-depth reform of the fiscal and taxation system, clear up the thoughts to the carbon market trading rules, is on its relevant rights and obligations, firmly adhere to steadily promote carbon market links between countries. Currently, China’s carbon emission trading is still in its infancy, and its effect is still limited in specific practice. Meanwhile, carbon emission trading markets in developed countries such as the United States and the United Kingdom have begun to implement carbon tariffs and other means to maintain their carbon borders. Therefore, the construction of carbon emission trading is necessary for development, but also for the sustainable development of the country.The lag of China’s carbon emission market leads to the worsening of the problem of carbon excess emissions of industries in the regions not covered, and the increased economic burden caused by the carbon barriers of other countries in foreign trade. Of course, this requires China take the path of sustainable development to continue to strengthen the system construction of carbon emission rights and promote the further optimization of their functions.

Углеродный сбор Евросоюза:на пересечении климатической и внешнеторговой политики

The European Union (EU) is getting ready for the implementation of СBAM — the world’s first carbon border adjustmentmechanism. This article explores the correlation between intra-European and international facets of СBAM as two sides ofthe same coin: while appending the EU Emissions Trading Scheme, it is equally an instrument of foreign trade, immediatelytouching upon EU relations with trade partners and specialized international organizations. Once such correlation is takeninto account, it becomes evident why the design of the European carbon levy remains capable of improvement as far as fightingclimate change goes.The concept of multilevel governance assists this research as the basis for analyzing СBAM. The institutionalist approachclarifies the specifics of the European carbon border adjustment mechanism. They are important in order to scopeout its true perspective. In particular, the MLG approach helps to expose the blurred lines between market regulation andtax policy in European governance practice.The ways, if any, that СBAM differs from a carbon tax and, at the same time, is similar to a carbon tariff are considered.A reappraisal made in the article of this hybrid measure makes it possible to draw a conclusion that, as envisioned bythe European Commission, it is meant to ensure more favourable conditions for investments in cost-intensive, low-carbontechnologies while suppressing competition from cheaper, high-carbon imports. At the same time, so as to avoid unleashingtrade wars, it is important for the Commission to assure the maximum possible conformity of СBAM to the World TradeOrganization’s (WTO) legal requirements. Compatibility with WTO law would enhance the ecological legitimacy of theregulatory mechanism in question. It would make sure that international partners would not regard СBAM as a form ofgreen protectionism.Further, the subtle aspects of preferences in terms of СBAM design are discussed, as held by the Commission, EUmember states, the European Parliament, and the representatives of European carbon-intensive industries. Particular attentionis paid to the discussion in the EU on the issue of connecting export rebates for inside producers to CBAM.

Transnational remanufacturing decisions under carbon taxes and tariffs

Considering the influence of carbon taxes and tariffs on transnational closed-loop supply chains, this paper establishes three remanufacturing modes of an original equipment manufacturer (OEM) in an exporting country. In one remanufacturing mode, the OEM conducts remanufacturing itself, and in the other two modes, the OEM authorizes a retailer in the importing country to engage in remanufacturing. Next, we analyse the optimal pricing and carbon emissions reduction decisions of the OEM and retailer in the different modes and further study how different levels of carbon tax and tariff combinations impact OEM remanufacturing decisions, the social welfare of importing countries and the environment. The results show the following. (1) When the carbon tariff is high, the optimal sales of remanufactured products increase. However, this does not contribute to the continuation of the product system; thus, it is short sighted for the government to hastily set high carbon tariffs to discourage the import of new products to protect domestic enterprises. (2) Carbon tariffs cannot effectively encourage the OEM to invest in emission reduction because carbon tariffs are passed on to consumers in importing countries through price adjustment. However, carbon tax may be an indirect factor affecting the OEM's willingness to invest in emission reduction. (3) The OEM favours allowing the retailer to remanufacture when the carbon emissions of the remanufactured products are similar to those of new products. Co-investment in emission reduction has the potential to align the profit maximization of the OEM with the social welfare maximization of the importing country. (4) It is not profitable for the importing government to set high carbon tariffs to protect its own enterprises.

The Evolution Logic, Opportunities and Challenges of China's "Double Carbon" Policy under the US-China Trade War

The outbreak of the U.S.-China trade war has had a profound effect on China's domestic energy market. It has caused drastic fluctuations in energy prices, such as coal and natural gas, and has profoundly affected China's goal of "double carbon." Through the collection of relevant literature and data analysis, this paper summarizes the evolution logic of China's "double carbon" policy from a macro to micro perspective, including its status, objectives, layout, and implementation. It reveals the opportunities presented by China's "double carbon" policy, such as reducing energy dependence, forcing enterprises to transform and upgrade their foreign trade structure under the background of the U.S.-China trade war. However, China's "double carbon" policy is also facing the challenge of "carbon tariffs." Since the goal of "double carbon" is related to the Community of Shared Future for Mankind, global climate control, and China's green development plan, the author hopes to clearly demonstrate the promotion process and future trends of China's "double carbon" policy through this article.

An economic and greenhouse gas footprint assessment of international maritime transportation of hydrogen using liquid organic hydrogen carriers

The supply, storage, and (international) transport of green hydrogen (H2) are essential for the decarbonization of the energy sector. The goal of this study was to assess the final cost-price and carbon footprint of imported green H2 in the market via maritime shipping of liquid organic hydrogen carriers (LOHCs), including dibenzyl toluene-perhydro-dibenzyltoluene (DBT-PDBT) and toluene-methylcyclohexane (TOL-MCH) systems. The study focused on logistic steps in intra-European supply chains in different scenarios of future production in Portugal and demand in the Netherlands and carbon tariffs between 2030 and 2050. The case study is based on a formally accepted agreement between Portugal and the Netherlands within the Strategic Forum on Important Projects of Common European Interest (IPCEI). Under the following assumptions, the results show that LOHCs are a viable technical-economic solution, with logistics costs from 2030 to 2050 varying between 0.30 and 0.37 €/kg-H2 for DBT-PDBT and 0.28–0.34 €/kg-H2 for TOL-MCH. The associated CO2 emissions of these international H2 supply chains are between 0.46 and 2.46 kg-CO2/GJ (LHV) and 0.55–2.95 kg-CO2/GJ (LHV) for DBT-PDBT and TOL-MCH, respectively.

The Impact of Carbon Tariffs on China’s Agricultural Trade

On 15 March 2022, the European Council reached an agreement on the relevant rules of the Carbon Border Adjustment Mechanism (CBAM). In order to study the impact of the implementation of carbon tariffs on China’s agricultural trade, this paper sets three control groups, namely, economic development, the impact of the “Belt and Road” initiative’s (BRI’s) trade facilitation level, and separate taxation by different countries, and uses the dynamic Global Trade Analysis Project—Environment (GTAP-E) model for policy simulation. The empirical results show that, firstly, carbon tariffs can suppress international demand for agricultural products and increase international market prices. At the same time, under the pressure of carbon tariffs, China will reduce the main agricultural product’s Free on Board (FOB) prices to ensure that their Cost, Insurance and Freight (CIF) prices can maintain a competitive advantage in the international market after increasing the cost of carbon tariffs, and the market share of China’s agricultural products exported to recipient countries will decline. Secondly, China’s “Belt and Road” initiative has a two-way impact on carbon tariff policy. On the one hand, it reduces the negative impact of carbon tariffs through trade facilitation, and on the other hand, it will decrease the effectiveness of carbon emission reduction because of the huge trade demand and encourage countries to develop green and low-carbon agriculture. Finally, there is heterogeneity in the impact of carbon tariffs imposed by the United States, Japan, and Europe on Chinese agricultural trade.

The Economics of Border Carbon Adjustment: Rationale and Impacts of Compensating for Carbon at the Border

International trade contributes directly to global greenhouse gas emissions, as the carbon content of high-emission products is priced differently in different countries. This phenomenon is termed carbon leakage. Thus, not putting a price on carbon is theoretically equivalent to an export subsidy, although that would be difficult to challenge in the context of multilateral trade law. Leakage can be alleviated by pricing the carbon embedded in imported products through a border carbon adjustment (BCA), be it a tax, a carbon tariff, or a regulation requiring the purchase of emissions allowances. The design of a BCA is a compromise between environmental effectiveness in preventing leakage, economic effectiveness in preserving competitiveness and ensuring acceptability, technical feasibility of the implementation, and World Trade Organization compatibility. An import-limited BCA is more effective than free emissions allowances in reducing leakage, but it does not preserve the export competitiveness of the country imposing it.

Research on the Impact of the EU’s Carbon Border Adjustment Mechanism: Based on the GTAP Model

There is now widespread agreement that the world community must actively combat climate change and advance green and low-carbon development. In order to deal with the issue of carbon leakage caused by the rising cost of industrial production as a result of policies to reduce greenhouse gas (GHG) emissions, the EU intends to implement the Carbon Border Adjustment Mechanism (CBAM) in its entirety starting in 2026, the pilot phase of which will begin in 2023. This shows the progressive emergence of a new international trade system driven by “climate change actions”, “carbon peaking”, and “carbon neutrality”, which will have a broad and far-reaching impact on China’s foreign trade industry. As more industries are being covered by the EU’s CBAM, it will exert a negative impact on the social welfare and export of China, the largest trading partner of the EU, even though the existing mechanism has only limited economic impact on China’s energy industry. This paper presents policy proposals to actively address the issues and effects of the EU’s “carbon tariff” by methodically analyzing the EU CBAM’s operation process and, via the development of models, determining the mechanism’s influence on social welfare, carbon emissions, and China’s exports.

Impact of carbon tariffs on price competitiveness in the era of global value chain

More and more countries are joining the discussion on climate mitigation through a range of emissions reduction policies such as carbon pricing. However, differences in carbon prices and policy intensity have led countries to worry about issues such as unilateral competitiveness loss and carbon leakage, and carbon border adjustment mechanisms have emerged. This paper analyzes the impact of carbon border adjustment on price competitiveness with the carbon tariff system to be implemented by the EU and the US. First, we obtain the cost pass-through rates of 14 regions-3 sectors through the panel regression of error correction model, and corrects the input–output price model for incomplete cost transmission. Combined with global inter-industry linkages, the impact of carbon tariff levy on the real effective exchange rate, the main indicator of price competitiveness of each region and industry, is examined for the EU CBAM and the US Clean Competition Act. On this basis, we use the effective rate of protection which is adjusted with global value chain, to analyze the positive effect of carbon tariff policy on domestic producers. Finally, the welfare effects of residential households are estimated, after quantity adjustment using the real effective exchange rate. The results show that when only direct carbon tariffs are analyzed, the impact of the US Clean Competition Act is greater than that of the EU CBAM for Australia and Canada, and for Japan and other regions, the sanctioning effect of the EU CBAM is more significant. When considering the impact of cumulative tariffs in the upstream, the output prices of countries further increase, and the cumulative carbon tariffs of the US under the two scenarios are as high as 0.61 % and 0.81 %. According to the results of the real effective exchange rate, the price competitiveness of the US and Russia decreases. The effective rate of carbon tariff protection is negative in all countries except for the implementers of carbon tariffs - the US and the EU, which means that the producers lose value added due to carbon tariffs. Finally, the welfare effects analysis shows that the two largest causes of welfare losses are the increase in domestic prices and the prices of imported goods from the US.

The EU Carbon Border Adjustment Mechanism will exacerbate the economic-carbon inequality in the plastic trade

The EU Carbon Border Adjustment Mechanism (CBAM) is regarded as the world's first carbon tariff regulation. Its consequential impacts on the trades of individual countries/regions at different development stages are crucial for climate justice while remaining unclear. By combining Multi-regional Input-output analysis and scenario analysis, this study analyzed the economic-carbon inequality in national/regional plastic exports and simulated CBAM's short-term impacts on plastic trade inequality under different scenarios. Our analysis shows that the maximum values of total carbon tariffs for all countries/regions levied on plastic exports to the EU will be 497.8, 859.1, and 1564.2 million euros under scenarios covering Scope 1, Scope 1&2, and Scope 1&2&3 emissions, respectively. The corresponding proportions of CBAM costs to national/regional plastic export volumes to the EU will be 0.6%, 1.0%, and 1.8% on average, respectively. China and the rest of Asia and the Pacific will burden the most CBAM costs in all cases, and Russia will be the country most affected. CBAM will exacerbate the economic-carbon inequality in the plastic trade by reducing the trade profits of developing economies with higher ratios than those of developed economies. Our analysis calls for practical initiatives to induce technological advances toward lower carbon technologies, increase trade diversification, exploit the domestic market's potential, and implement domestic carbon pricing mechanisms to alleviate the negative impact of CBAM.

Research on the Improvement Idea of the Carbon Tariff System

As the problem of the greenhouse effect becomes more serious, limiting carbon emissions has become an issue in environmental issues. The author agrees that the existing EU carbon tariff policy has a positive incentive to limit carbon emissions. However, for the global carbon emission problem, a joint boycott mechanism should also be established in order to truly make the carbon emission governance of the international community achieve Pareto optimality, that is, to achieve the optimal allocation of resources on the carbon emission issue. But the boycott mechanism is only an answer drawn from the overall efficiency of the international community, and it does not answer the question of the legitimacy of international economic law and the achievement of fair distribution. Therefore, the author interprets carbon tariffs in terms of international law and supports that the purpose of carbon tariffs is to maintain public morality and can become an exception to the principle of most-favored-nation treatment. The author also envisages several preconditions for establishing carbon tariffs to achieve the goal of fairness and to exclude individual countries from using carbon tariffs to restrict international trade in disguise.